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II Principle of No Arbitrage ( 15 points) 1. (7 points) What does the no arbitrage principle state? Please explain briefly (3-4 sentences). 2. (

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II Principle of No Arbitrage ( 15 points) 1. (7 points) What does the no arbitrage principle state? Please explain briefly (3-4 sentences). 2. ( 8 points) What is the relation between the no arbitrage principle and market efficiency? Can arbitrage opportunities exist if the market is fully efficient? Please explain briefly ( 34 sentences)

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